ACCOUNTING

Where a business is purchased, the full amount of the purchase consideration is credited to

• • Purchase of Business Account

• • Creditor's Account

• • Vendor's Account

• • Purchaser's Account

• • Debtor's Account

Which of the following is the equation for determining net profit or loss from the records of a firm?

• • Closing Capital - Drawings - Capital Introduced

• • Opening Capital + Drawings - Closing Capital

• • Closing Capital + Opening Capital - Drawings

• • Closing Capital + Drawings - Opening Capital

Answer explanation

Correct Answer: Option C

Explanation

Your net income or net loss equals your total revenues minus your total expenses for an accounting period. If your revenues are greater than expenses, you have net income. If revenues are less than expenses, you have a net loss. example

Net profit or loss = Revenue - total expenses

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Purchase invoice is first entered in the

• • Purchases Account

• • Cash Book

• • Sales Journal

• • Purchases Journal

Assets acquired is recorded by debiting _______?

• • . Asset Account, Crediting Cash Account

• • Cash Account, Crediting Asset Account

• • Purchase of Business Account, Crediting Sale of Business Account

• • Asset Account, Crediting Purchase of Business Account

Answer explanation

Correct Answer: Option A

Explanation

Debit the appropriate asset account in a journal entry in your records by the cost of the asset. Credit the cash account in the same journal entry by the amount of cash you used toward the purchase. If you paid all cash, this amount is the same as the asset's cost.

Goods returned to a supplier is

• • Debited to returns outward account

• • Credited to returns outwards account

• • Debited to returns inwards account

• • Credited to returns inwards account

Answer explanation

Correct Answer: Option B

Explanation

When merchandise purchased for cash are returned to supplier, we need to record two journal entries. In first entry we debit accounts receivable account and credit purchases returns and allowances account (returns outwards would ve credited because goods are going out of the business). This entry is made to recognize the return of merchandise.

Which of the following is a real account?

• A. Plant account

• B. Salaries account

• C. Creditors account

• D. Trading account

• • Plant account

• • Salaries account

• • Creditors account

• • Trading account

In the purchase of a business, a buyer has paid more than the value of the net assets of the business. The excess payment is referred to as

• Bonus

• Goodwill

• Net profit

• Premium

The price paid for the purchase of a business is

• credited to cash accounted and debited to vendor's account

• debited to cash account and credited to Vendor's Account

• debited to business purchase Account and credited to Asset Account

• credited to cash Account and debited to Asset Account

Capital receipt is collected

• • on sales of motor vehicle

• • on sales of stock in trade

• • from trade debtors

• • from trading activities

Answer explanation

Correct Answer: Option A

Explanation

Capital receipts are receipts that create liabilities or reduce financial assets. Option A is correct, because when a business sells its motor van, it leads to a reduction in assets

Which of the following is an example of factory overheads?

• • salary of marketing officer

• • salary of production officer

• • salary of accounting officer

• • wages of machine operator

Answer explanation

Correct Answer: Option A

Explanation

Factory overhead is the costs incurred during the manufacturing process, not including the costs of direct labor and direct materials. 

Examples of factory overhead costs include: indirect materials, indirect labor, depreciation of the factory equipment and plant, amortization of patents, the cost of small tools used, factory utilities, insurance on the factory and equipment, property taxes on plant and equipment, property taxes on materials and goods